Most economists attribute Venezuela’s soaring inflation to loose monetary policy, exchange controls, devaluation and anaemic domestic production, dynamics that show no sign of abating.
“The government has boxed itself in with a misguided policy mix of rampant spending and price and foreign exchange controls that has resulted in a growing output gap and galloping inflation,” said Patrick Esteruelas, of Eurasia Group political consultancy. He added that the government, unwilling to risk austerity measures in the run-up to September’s congressional elections, was deflecting blame. “It has found it highly convenient to persecute private food retailers.”
Venezuela’s authorities disagree. They say private firms are cheating customers with unjustified price rises that are driving 30% inflation, Latin America’s highest. Food prices are rising even faster, at 40%. According to Chávez, it is part of a plot by US-backed “fascist oligarchs” to destabilise his leftist experiment.
“Do you know why capitalist prices are so high? Because they are thieves, stealing from the people. Don’t let them trick you,” said the president during a TV broadcast last week. He promised to crush speculators and lower prices in what he termed an “economic war”.
But problems are mounting. In the name of “nutritional sovereignty” the government seized 6m hectares (about 15m acres) of farmland, expanded cultivation and set up socialist co-operatives. Results are poor: beef, sugar, coffee and fruit production plunged. Grain and rice output initially rose, but fell last year.
When even The Guardian is running reports on how socialism makes the food supply go tits up then yes, you’re toast.